The wholesale price index-based inflation fell for the third consecutive week to close at 12.1 per cent for the week ended August 30, due to a fall in prices of a few food articles and manufactured products.
In the three weeks up to August 30, the WPI has slowed down from the 13-year peak of 12.63 per cent.
However, the inflation rate of 30 essential commodities, tracked closely by the government, increased by 62 basis points to 7.52 per cent for the week ending August 30 because of increase in prices of salt, sugar, wheat and urad, the finance ministry said in a statement.
Analysts said the impact of fall in global prices could be seen from the next week, which means inflation may fall further, if other factors remain as they are now.
“Inflation will drop gradually and I expect it to reach 10 per cent by the middle of January,” Axis Bank economist Saugata Bhattacharya said.
Though inflation growth rate has declined from its 13-year peak, it’s still higher than the central bank’s comfortable rate of around 5 per cent.
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Annual inflation rate for primary articles group declined to 10.07 per cent, as compared with 10.79 per cent reported last week. The group containing 98 articles showed no increase in prices for 61 goods. In the fuel group, which contains 19 commodities, the prices remained unchanged.
In the manufactured products, the rate of inflation in the current reporting week declined to 11.07 per cent, compared with 11.28 per cent a week ago. Out of 318 commodities in this group, 296 showed no increase in prices.
However, analysts saw a status quo in the RBI’s interest rate policy, even if inflation continues to decline. Interest rates have hardened in the past few months as the central bank increased cash reserve ratio and short-term lending (repo) rate by 1.5 per cent and 1.25 per cent, respectively, since April to tame the price surge.